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This paper develops a real business cycle model with five types of fundamental shocks and one "equity sentiment shock" that captures animal spirits-driven fluctuations. We examine the effect of negative nominal interest rates on bank profitability and behavior using a cross-country panel of over 5,100 banks in 27 countries.The representative agent's perception that movements in equity value are partly driven by sentiment turns out to be close to self-fulfilling. Counterfactual scenarios with the model suggest that the equity sentiment shock has an important influence on the paths of most U. Our data set includes annual observations for Japanese and European banks between 20, which covers all advanced economies that have experienced negative nominal rates, including currency union members as well as both fixed and floating exchange rates countries.

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I solve for the sequences of shock realizations that allow the model to exactly replicate the observed time paths of U. consumption, investment, hours worked, the stock of physical capital, capital's share of income, and the S&P 500 market value from 1960. The model-identified sentiment shock is strongly correlated with survey-based measures of U. When we compare negative nominal interest rates with low positive rates, banks experience losses in interest income that are almost exactly offset by savings on deposit expenses and gains in non-interest income, including capital gains on securities and fees.

We find heterogeneous effects of negative rates: floating exchange rates, small banks, and banks with low deposit ratios drive most of our results.

The results highlight a stronger degree of synchronization during recessions, while in time of economic expansion there are 2 well-defined macro cycles corresponding to each continent: Europe, North America and the emergent Asian cycle.

Furthermore, trade was proven to be an important business cycle vector just for some countries, while for the completeness of the study additional variables should be also taken into consideration.

The aim of this research paper is to assess business cycles’ synchronization within the G7, emphasizing the role of the trade channel as a transmission vector.

Annual growth rates for GDP and trade were filtered using the Hodrick-Prescott method and the results were correlated through the Pearson approach to obtain the degree of similarity between countries with respect to their economic fluctuations.

n December 2012, the Spanish Economic Association created the Spanish Business Cycle Dating Committee.

The committee follows a methodology similar to those of the CEPR Euro Area Business Cycle Dating Committee and the NBER Business Cycle Dating Committee to provide a chronology of the Spanish Business Cycle.

Two equilibria emerge: In the “target equilibrium,” policy is unconstrained most or all of the time, whereas in the “liquidity trap equilibrium,” policy is mostly or always constrained.

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